Reverse Logistics Results in Competitive Advantage

Reverse Logistics Results in Competitive Advantage

Continuing growth in the range of online business channels used by Retailers and Manufacturers is further increasing the pressure on both to offer better-quality options for returning unwanted or damaged products.

That trend is in turn ramping up the requirement for logistics providers to help develop new and enhanced aftermarket service ‘reverse logistics’ operations for those companies, in Asia and worldwide, which are easy for end-customers to use, efficient and cost-effective, thereby also giving them a competitive advantage.

“Increasingly, the ability of a logistics provider to offer efficient and cost-effective returns solutions is an important factor when pitching for supply chain business,” said Malvina Thomason, head of business development UK for omni-channel logistics at SEKO Logistics, a multinational supply chain solutions provider active in many Asian and other global markets.

Thomason agreed that in the past some companies might have seen reverse logistics as just an additional cost they had to bear. However, she added: “That view has changed in recent years and reverse logistics is now seen as a positive competitive differentiator where the quality of the returns service is crucial.”

Thomason pointed out that returned unwanted items or damaged goods for repair were a fact of life for retailers worldwide. “Returns can be one of the largest contributors to margin erosion but that doesn’t need to be the case these days. Now, companies can put unwanted or repaired returns back into stock for resale. So it is a question of having a quality reverse logistics process.”

In addition to saving costs, continued Thomason, such a process could also be a competitive weapon for retailers. “They are aware of the need to provide customers with an easy-to-use, efficient returns option. A retailer can put a consumer off making a purchase, particularly a big-ticket item, if it does not offer an easy way to return the item if the buyer is not satisfied with it.”

In the manufacturing sector, the trend to upgrade the quality of reverse logistics operations is particularly apparent in the automotive industry. One recent example involving SEKO Logistics saw that company earlier this year announce it had been awarded a contract by UK manufacturer Jaguar Land Rover relating to the transport and shipment tracking elements of a fully automated, global priority warranty parts returns service for its dealerships worldwide, including those in Japan, Singapore, Malaysia and Australia.

The general push by automotive manufacturers to develop more sophisticated reverse logistics and general aftermarket services was confirmed by Fathi Tlatli, president, global automotive sector, DHL customer solutions and innovation.

He explained that with increasing volumes of standardized products across brands and even OEMs (original equipment manufacturers), automotive producers were constantly looking for new ways to differentiate. “Various surveys show that in today’s world, the level of aftermarket service is the main criteria for repurchase in the eyes of end customers,” he stated.

Tlatli also went on to suggest that beyond its importance for customer loyalty, the aftermarket business was a major contributor to automotive companies’ bottom lines. “It is, then, vital that aftermarket operations are run smoothly and in an optimised manner.”

In the light of such issues, continued Tlatli, reverse logistics was “a must” for a logistics service provider like DHL which aimed to provide end-to-end solutions for its customers. “It contributes to ensuring customer satisfaction and long-term brand loyalty. It is also a main focus area for companies willing to optimise their end-to-end environmental footprint since that supply chain area still suffers from a lack of consolidation and efficiency.”

Going into more detail on that last point, Manoëlla Wilbaut, head of global commercial, developments & sustainability, DHL customer solutions & innovation, said that while most automotive industry customer requirements in relation to reverse logistics were concentrated around warranty parts operations, several other activities were gaining in importance.

One example, she said, was recall logistics, “where we expect demand to grow because of parts standardisation, platforming trends and more and more constrained vehicle design lead times”. Another emerging area was the management of waste and recycling material. A third centred on remanufacturing related activities “where we can offer sorting, testing and repair services that are especially relevant in relation to high-value parts such as the heavy lithium batteries used in electric vehicles.”

Tlatli also highlighted one further trend which, he said, was influencing the automotive sector’s demand for enhanced reverse logistics services. “Online aftermarket parts retail is getting more and more popular and even OEMs are starting to enter this business,” he reported.

“With this trend confirmed, we expect customers’ requirements in terms of parts returns to get closer to those of the consumer goods sector. When buying clothes online you don’t only expect your package to be delivered on time, you also expect to be able to return the goods at no cost if they do not meet the expectations, for whatever reason.”

Many other major global manufacturing industries are also stepping up their focus on reverse logistics capabilities. Recently, for example, worldwide forwarder Panalpina established a strategic alliance with Hong Kong-based Spread Logistics to create a “circular supply chain with reverse logistics” for companies in China’s electronics manufacturing sector.

Through that alliance, explained Panalpina, the two logistics providers could pick up faulty consumer electronics at origin, undertake failure analyses and – if required – return the products to the original manufacturer in mainland China. “The customer gains visibility of all return materials in the supply chain and can make data-based decisions on the reuse, repair, disposal or even redesign of its products,” it stated.

Mike Wilson, global head of logistics at Panalpina, added: “We collect and pass on the data that is needed to decide if a product can be repaired close to the consumer market or if it needs to be shipped back to China for bigger repair work or even disposal.”